Test Scandal in Atlanta Brings More Guilty Pleas
The cast of characters was mostly former teachers and principals, six of whom pleaded guilty on Monday in a Fulton County courtroom for their part in what has been described as the largest cheating scandal in the nation’s history. Their pleas bring to 17 the number of educators who have already pleaded guilty, with a handful more in active negotiations. But the real focus seemed to be on the woman sitting quietly near the rear of the courtroom, Beverly Hall, the former superintendent. Once considered to be among the top urban school leaders in the country, she is now viewed by some as the ringleader of a vast cheating conspiracy devised to make her and her district look good.
Test Scandal in Atlanta Brings More Guilty Pleas
By KIM SEVERSON and ALAN BLINDER, NY TIMES
ATLANTA — The cast of characters was mostly former teachers and principals, six of whom pleaded guilty on Monday in a Fulton County courtroom for their part in what has been described as the largest cheating scandal in the nation’s history. Their pleas bring to 17 the number of educators who have already pleaded guilty, with a handful more in active negotiations.
But the real focus seemed to be on the woman sitting quietly near the rear of the courtroom, Beverly Hall, the former superintendent. Once considered to be among the top urban school leaders in the country, she is now viewed by some as the ringleader of a vast cheating conspiracy devised to make her and her district look good.
Dr. Hall, 67 and ill with breast cancer, has pleaded not guilty to charges of racketeering, theft and false testimony. She faces a trial in May along with at least nine and possibly as many as 14 more defendants, prosecutors said.
But in many respects, prosecutors began laying out their case against Dr. Hall during the plea hearings Monday, depicting her as the mastermind of a scheme that led to charges against 35 educators accused of manipulating test scores.
“The pressure from defendant Beverly Hall was constant,” the prosecutor, Clint Rucker, told Judge Jerry W. Baxter of Fulton County Superior Court.
The charges are based in large part on an investigation ordered by Sonny Perdue, the governor in 2010, into allegations of widespread cheating on the 2009 state-mandated Criterion-Referenced Competency Test.
Dr. Hall, who for more than a decade had been celebrated as an erudite, data-driven superintendent of a once-failing urban school district that became a model of improvement, was at the center of the inquiry from the start.
The report implicated at least 44 schools and 178 teachers and principals, and said cheating may have been going on for years. It was so pervasive that some administrators even held what investigators said were “erasing parties” to fix the tests.
More than 80 of the educators confessed and many resigned.
The investigation found that Dr. Hall and her administration “emphasized test results and public praise to the exclusion of integrity and ethics.” The result, it said, was a culture of fear, intimidation and retaliation that led to a conspiracy of silence.
Dr. Hall has said in interviews that while a small percentage of the more than 3,000 teachers under her did cheat, she did not condone it or ask them to. “The Beverly Hall as they characterize me is foreign to me,” she said in an interview after the investigation came out.
Many of the people who pleaded guilty are likely to face their former boss in court. As part of their agreement with prosecutors, they said they would cooperate as witnesses.
Clarietta Davis, the principal at Venetian Hills Elementary who investigators said wore gloves when she altered tests because she was worried about leaving fingerprints, pleaded guilty on Monday to a felony charge of making false statements.
None of the educators received jail time, but they will instead perform community service and, in some cases, pay back bonuses that were tied to high test scores.
Despite the charges and pleas, some here still believe the scandal has been overblown and the criminal charges excessive. “It’s more like Mouseketeering than racketeering,” said Bruce Harvey, Ms. Davis’s lawyer.
The 50,000-student district could end up spending more than $6 million offering remedial instruction to thousands of students, said Erroll B. Davis Jr., who took over as interim superintendent from Dr. Hall.
A new school board is in place and the search is on for a superintendent to take over in the next school year, said Ann Cramer, who is heading the search committee. “The community and the parents and the kids and the teachers are ready to move on, and there is a real spirit of hope,” she said. “Of course, there are a lot of barnacles that need to be scraped off, as they say, but a lot has been done.”
Many of the educators who pleaded guilty on Monday said they wanted to move on, too.
Starlette Mitchell, 32, a former teacher at Parks Middle School, told the judge that $3,000 in bonus money had nothing to do with why she helped change answers. “I truly believed that I was helping these children stay in school just one more year,” she said.
Judge Baxter was not impressed. “I give that about a D as far as an apology,” he said. “In any event, I accept your plea.”
From Betsy Combier: The corruption seems to have been rampant for many years. The article below was posted on this website in 2004:
Atlanta Public Schools misspent or mismanaged nearly $73 million from a national program intended to give poor children access to the Internet, an Atlanta Journal-Constitution investigation has found.
With virtually no limit on spending, Atlanta since 1998 has built one of the country's most lavish computer networks for schoolchildren.
Now, Atlanta says it needs $14 million a year --- three times the district's textbook budget --- just to run and maintain the network. And much of the promised benefit to students has yet to materialize.
Signs of the spending spree can be found throughout the school system.
At one elementary school, equipment powerful enough to operate a small school district runs just 20 computers. At another, Atlanta billed the program for electronics for twice as many classrooms as the school has. Millions of dollars were spent at other schools that were closed or demolished within a few years. Elsewhere, boxes of costly computer components, some still wrapped in plastic, gather dust in storage.
At three Atlanta elementary schools, the cost of bringing high-speed Internet access to classrooms reached about $1 million. Suburban Forsyth County, by contrast, paid about $200,000 for the same result at much larger schools.
The district spent money without requiring bids for the best price, with little oversight from school board members and few questions from check writers in Washington who subsidized the work. APS officials defer many questions about spending to former employees.
The national program that financed Atlanta's extravagance, called E-rate, won't pay for computers but helps schools pay for Internet infrastructure they might not otherwise be able to afford. Now, amid charges of waste and fraud around the country, the program faces mounting scrutiny in Washington.
Americans everywhere have picked up the tab for E-rate through a surcharge on their telephone bills.
Atlanta's high concentration of poor students put its schools first in line for E-rate dollars. The district took full advantage, soaking up nearly five times more E-rate money than any other Georgia school system. Nationally, only Cleveland was approved for more per pupil from the program during Atlanta's four years of E-rate funding.
Even after spending so much, Atlanta asked E-rate to subsidize an additional $81 million in 2002, in part for still more upgrades. E-rate officials denied nearly all of the request after finding that the district wasn't making price the primary factor when awarding contracts.
School officials defend their aggressive pursuit of the funds. "If federal money is out there for us to provide services for the children of this school system, then we have an obligation to go out and get it," said Margaret Coleman, the district's chief financial officer.
E-rate has helped Atlanta to dramatically upgrade its outdated computer network. Students in every classroom are now able to do research on the Internet. Teachers can access powerful databases to analyze test scores and plan lessons.
But Atlanta's free spending also bought a network so sophisticated that APS has asked E-rate to help pay $14 million more next year to operate and maintain it. Because Atlanta lost E-rate funding the past two years, city taxpayers currently foot the bills to run it --- $7 million this year.
To track E-rate spending in Atlanta, the newspaper examined thousands of invoices, inspected equipment in a dozen schools, and interviewed dozens of school officials, vendors and consultants. Among the findings:
APS repeatedly ordered equipment and upgrades that it did not need, often choosing the most expensive components on the market.
Price played little role when APS chose vendors, so the district routinely paid them too much. Vendors charged widely different prices for similar equipment. Hundreds of invoices indicate full price when education discounts of up to 45 percent are common.
APS often is not sure what it bought because invoices are vague, incomplete or inaccurate. In some cases, the newspaper found, the district received lower-grade cable than it had paid for, or did not get equipment that appeared to have been purchased.
One vendor told the Journal-Constitution he submitted proposals to E-rate that included goods and services that were never delivered, but said he provided Atlanta schools with other equipment and work of equal value. The district hired an investigator to look into the vendor's E-rate work after the newspaper showed officials the billing records. That inquiry is ongoing.
Charles Engstrom, Atlanta's deputy superintendent of operations, conceded the vendor's vague paperwork was troubling. "The records are not there to show anything was done wrong, but there's nothing there to show it was done right," he said.
Thelma Malone, president of the Atlanta Council of PTAs, expressed concern that students may not have gotten the best use of resources. "We are hoping that the superintendent will get to the bottom of this," she said.
Top district officials said they could not answer many questions about E-rate spending because key decisions were made before they came to work for the district.
But they defended the decision to build the most sophisticated network possible. "This money was being given to provide this kind of technology, if not for current use, for future use," said Beverly Hall, Atlanta's school superintendent since July 1999, 15 months after the first E-rate contracts were approved. "We needed to take advantage."
Sometimes, though, building for the future simply wasted money. Case in point: Atlanta's spending on wireless technology.
Anticipating a day when every student would have a laptop, APS in 1999 began wiring most schools for wireless Internet access, at a cost of at least $2 million. Because the cost of buying tens of thousands of laptops was prohibitive, however, the district largely abandoned the system about three years later in favor of a much cheaper alternative.
Hall said the district had beefed up E-rate oversight. Atlanta last year obtained substantially lower prices after rebidding E-rate work, and adopted a procedure last month for banning vendors who don't deliver contracted services.
These steps came only after federal regulators found the district wasn't bidding work properly and denied Atlanta's 2002 E-rate request.
School officials referred many questions to the district's former technology director, Arthur Scott, who resigned last year to take a job with Decatur city schools. Scott declined to explain how prices were determined.
"We followed the guidelines and the rules, and that's the best I can tell you," Scott said.
The Internet was a young technology in the mid-1990s, but educators saw its value as a learning tool even then.
In 1996, Vice President Al Gore pushed through changes to a Depression-era program designed to help rural areas get telephone service. Dubbed the "Gore tax" by critics, the E-rate program gives schools up to $2.25 billion a year.
Until recently, E-rate escaped extensive scrutiny. But abuses have prompted Congress and the Federal Communications Commission to take a closer look.
Rep. James C. Greenwood (R-Pa.), whose House subcommittee is investigating E-rate fraud elsewhere in the United States, said the problems reflected more than just growing pains for a huge new program.
"If we weren't doing this investigation, there would be pigs at the trough for as long as this program's out there, and they would be stealing money, and they would be squandering money, and they would be keeping money away from the kids who need it," Greenwood said.
Most school districts in Georgia and elsewhere don't get all the E-rate funding they want because the money runs out. The program's pool of money, while large, cannot meet the demand.
Poor districts need contribute only 10 percent to 20 percent toward the cost of most E-rate projects, and until this year they could ask for as much money as they wanted.
The ingredients became a recipe for extravagance, allowing Atlanta to build the most sophisticated computer network money could buy. That's exactly what Arthur Scott did.
E-rate's promise of billions stirred a frenzy among technology companies eager for the business and districts anxious to harness the Internet's seemingly boundless potential.
Scott, APS' technology director and the son of a former principal, quickly realized the possibilities.
So did major technology companies. IBM Corp. brought Scott and his staff to North Carolina for a weekend retreat on Atlanta's technology needs. Cisco Systems, a manufacturer of network electronics, sponsored an E-rate seminar in Atlanta. BellSouth gave APS $45,000 to plan for technology in the classroom.
In April 1998, Atlanta gave BellSouth the task of developing a "cost-conscious strategy" to upgrade the district's network. Cabling work at individual schools went to five other vendors, including IBM and Lucent Technologies.
For a local match of $1.7 million, Scott told the school board, the district could get enough from E-rate to do more than $8 million in work.
The board did not vote on E-rate contracts again for five years. Contracts were automatically renewed.
During that time, Atlanta and E-rate paid vendors nearly $73 million, including $13 million in local matching funds. E-rate approved an additional $22 million, including $10 million that the program hasn't paid because of a paperwork error. Much of the remainder was never spent.
School board Chairman Mike Holiman said the board had some idea of how E-rate money was being spent but that details were left to school staff. "I would say that [E-rate] has been under the radar of the board," Holiman said.
Vendors played a crucial role in advising Scott on how to build and equip the network. Cisco engineers practically lived at APS in the early going, Scott said, mapping out the network. IBM, BellSouth and Lucent also helped with the design, he said.
But Scott said Atlanta used its own specifications, or advice from outside consultants, to decide precisely what the network needed. "We always took an independent stance, so we wouldn't have to rely on a vendor to tell us what we needed to do."
Scott said he envisioned a powerful network worthy of a Fortune 500 company. "We wanted a network where we could literally deliver instructional services anywhere, anytime, anyhow," he said.
With federal money flowing, the school system spared little expense.
Atlanta installed Cisco's top-of-the-line electronics --- the equipment that moves Internet traffic through cyberspace --- in every school, rather than in a limited number of regional hubs. Just one or two of the components could run an entire network; Atlanta ultimately bought more than 200 of them at $50,000 to $100,000 each.
The district laid miles of fiber-optic cable, the most expensive on the market, to many classrooms. But under Atlanta's network design, more affordable copper cable could have been used with no loss of speed.
APS even wired some schools twice, first with copper cable and a year later with fiber-optic cable and entirely new electronics. The resulting network produced more horsepower than that available to Georgia Tech students.
Scott said he briefed his superiors on the cost and capabilities of the network he was building. Scott's former supervisors said they understood the network's general characteristics, but let Scott decide what equipment and services to buy.
Hall, the superintendent, said she focused on classroom instruction during her first years in office, leaving E-rate management to others. "It was not my priority at that time to begin getting into the bowels of what was going on," she said.
APS launched its most costly upgrade in 2001 at middle and high schools. For a price of $7.3 million, BellSouth installed a new network backbone using the fastest technology on the market. This "gigabit ethernet" system boosted capacity tenfold.
The expansion wasn't made out of necessity. The schools' existing system easily handled Internet traffic.
But school officials, looking years down the road, wanted a system that could carry telephone calls over the computer network and provide streaming video to every classroom computer.
BellSouth told APS it could sharply reduce telephone bills in the long run by merging data, voice and video traffic on one network.
In 2002, however, Scott urged management to slow down plans for a second phase extending the gigabit network to elementary schools. E-rate had refused to pay a $2.7 million bill from BellSouth because of a paperwork error. Scott advised against moving ahead with the upgrade until the debt was paid.
Scott warned that the district could be on the hook for the full cost of operating and maintaining the new network if the school district lost E-rate funding.
In an interview, Scott said he also did not believe children in elementary schools needed the advanced technology that the new network would make possible.
BellSouth appealed directly to Hall and Robert Beman, then the district's chief information officer. Hall said she signed the $9.2 million contract for the elementary schools at Beman's urging.
"He felt this was the wave of the future and we were to take advantage of E-rate to do that," said Hall.
But the promised benefits of the gigantic data pipeline to Atlanta students remain largely untapped.
Widespread use of futuristic educational tools, such as streaming video and real-time instruction over the Internet, is still years away.
When they use it, APS students still surf the Internet at roughly the same speed as in 1999, before the gigabit upgrade. In a 2002 survey, three of four kids said they used computers less than an hour a day in Atlanta's classrooms, or not at all.
School officials are also still waiting for the anticipated savings on telephone bills because the Internet-based phone system remains on the wish list. Meanwhile, with the higher-speed network, BellSouth's monthly charge to bring data to schools has skyrocketed, from $185 a school in 2000 to more than $2,000 today.
In 2003, without E-rate funding, APS allowed all but a few of its computer maintenance contracts to lapse rather than pay the $3.8 million cost to service tens of millions of dollars' worth of equipment.
Lack of competition
School officials' relationship with E-rate vendors drove up costs even more. Vendors did not compete against one another to offer the best price; APS simply divided the work among them. Scott said he made the process more competitive by bringing in more contractors. But records do not show that officials ever questioned vendors' prices.
One vendor, Multimedia Communication Services Corp., or MCSC, routinely charged rates several times higher than market price to connect computers to the network --- up to $400 for each copper cable connection and up to $1,000 for fiber. When Atlanta finally rebid cabling work last year, the winning vendor offered $80 per copper connection and $325 for fiber.
R. Clay Harris, president and CEO of MCSC, said some of the connections in older schools required extra work and that he may actually have lost money.
Records show the district paid other vendors at the time as little as $125 per connection. Yet most of the cabling business went to Harris.
Atlanta also paid another company owned by Harris to install connections at schools where E-rate had already paid for computer cabling. Harris said the payments --- totaling more than $1 million in local funds --- were for additional connections in areas such as offices that E-rate would not pay for. But E-rate program administrators said the funding would have covered most if not all of those costs.
Invoices and price quotations raise questions about whether another vendor charged APS full price for Cisco equipment, a practice almost unheard of in the industry. Steep discounts are easy for school districts to get.
In 2000, billing records show, Atlanta DataCom, also known as ADCom, sold Atlanta schools $9.5 million in Cisco equipment with no discount. Cisco, the manufacturer, said it gave discounts of more than 30 percent to resellers such as ADCom.
When Atlanta rebid E-rate work last year, ADCom offered a 38 percent discount on Cisco equipment.
An attorney for the company said the undiscounted prices charged in 2000 included additional "bundled services" in an effort "to simplify billing." These bundled services were not itemized on invoices. ADCom officials declined to be interviewed or to provide documentation of the additional items.
The district also worked the system to maximize E-rate reimbursement.
For example, Atlanta asked E-rate to pay the same $231,250 price for equipment at every school --- even though school buildings varied drastically in size. Auditors for E-rate noted in 2002 that the practice had allowed APS to overbill E-rate $644,728. The issue was resolved by allowing APS to purchase more equipment with the money.
Scott said he routinely asked E-rate for more than he actually needed because federal regulators sometimes reduced the amounts arbitrarily before approving them. "You always ask for more than you need in hopes of getting what you want," Scott said.
Getting money for schools that were scheduled to be closed also increased Atlanta's take from E-rate. The district billed the program $5.5 million for work at schools that later closed or were demolished. In May 2000, Atlanta took delivery of $92,870 in Cisco electronics for Campbell Elementary. Two weeks later, the school closed. The equipment was shipped to storage.
Superintendent Hall and other senior APS officials defend the practice on the grounds that schools sometimes escaped closure at the last minute. They also said they felt obliged to treat all schools equally.
Just how and where Atlanta spent much of its E-rate money is difficult to determine because some vendors submitted vague invoices. Others did not specify quantities or unit prices of items they installed.
In many instances, records raise questions about whether the district got what it paid for. One vendor invoiced for a top grade of Lucent cable, but Journal-Constitution reporters saw a lower-grade cable installed. The same vendor, NetVersant Solutions, charged $718,000 in 2001 for wiring done in 38 data closets, which contain key network components, but those schools have only 18 closets, records show.
William Fiedler, NetVersant's general counsel, said APS provided the company with the number of closets at each school. NetVersant provided full value to the district, but some work billed for data closets was actually done at the district's main data center, not the schools, he said.
"There is nothing our company did that wasn't at the express direction of the public schools," Fiedler said.
APS billed E-rate for $3 million worth of e-mail and communications servers in 2001 but cannot say how many servers were received. In fact, district officials said they stopped installing e-mail servers in schools several years earlier.
MCSC's Harris said his E-rate funding proposals, which included the servers, were simply a menu of equipment and services that he offered. If some items weren't needed at a school, the money was spent on other items that would qualify for E-rate funding, he said.
E-rate administrators in Washington, however, said funding proposals must match work vendors do. Any changes would have required approval. They said APS never sought change orders.
The school district is now investigating E-rate work involving MCSC.
Tiny Arkwright Elementary illustrates how little E-rate work can actually be accounted for.
Hidden on a quiet street in southwest Atlanta, Arkwright has been on the chopping block for closing since 1995. The school board voted in 2000 to shutter the school. Last week, children left the building for the last time.
Since 1999, Atlanta has received $545,000 in E-rate money for network technology at Arkwright. Today it's hard to see where the money went. Because Arkwright was due to close, the district installed bare-bones electronics and wired most of the school with lower-cost copper cable rather than high-priced fiber-optic.
In 2002 alone, Atlanta billed for $278,250 for unspecified "connection materials" and two servers at Arkwright, based on MCSC's funding proposal. The amount included $52,500 for 44 classroom switches, even though the school needed only 20 for its 20 classrooms.
Trying to reconstruct what that money paid for, however, would be a "waste of time," Harris said, since his paperwork did not reflect the actual work performed.
Harris, a former accountant, said his company did other work, including work at APS' main data center, that was not itemized on invoices submitted to APS and E-rate.
Even so, MCSC billed for the exact amount originally proposed on his paperwork, a total of $12.5 million in 2002 at 49 schools.
Scott, who signed Harris' invoices, said he followed APS and E-rate policies. "The work that was submitted was the work that was done," he said.
After the Journal-Constitution raised questions about equipment purchases, school officials began to inventory what they had.
The newspaper found several million dollars' worth locked up in two storage facilities. At one location, mothballed Cisco electronics worth about $2 million were resting haphazardly on the bare cement floor. At another site, electronics worth $1.4 million or more sat unopened in large stockpiles around the room.
Some equipment was 3 years old, despite federal rules that equipment must be installed the year purchased.
Boxes of Cisco equipment worth more than $400,000 were designated for a school that already had the gear. Expensive switching components were stacked like phone books against one wall. Other equipment lay strewn around the floor or piled in heaps.
Asked why Atlanta might have purchased so much in idle electronics, equipment manager Toney Ward shrugged. "Maybe because of the availability of funding," Ward said, "they decided, 'Let's go ahead and do it.' "
This series was edited by Jim Walls and copy edited by Sharon Bailey.
WIRED FOR THE FUTURE: ATLANTAS PRICEY COMPUTER NETWORK
To bring high-speed Internet access to the classroom, Atlanta chose a costly design using fiber-optic cable and top-of-the-line equipment at virtually every school. Atlanta wired many schools for two high-speed connections, T1 and gigabit ethernet, but needs only one. Officials have suspended T1 service, but hope to reinstate it as a backup. How computers are connected in a typical Atlanta school:
1. Fiber-optic gigabit and slower T1 lines have been installed to carry data to each school. Gigabit made T1 obsolete, but Atlanta wants to use it for backup if federal grants will help pay for use.
2. The lines connect to a data closet where equipment costing $100,000 or more routes data to classrooms. (Many schools have secondary closets with gear costing $45,000 to $60,000.)
3. Fiber-optic or copper cables carry data to classrooms. Atlanta wired many classrooms with both. Speeds are the same in Atlanta schools, but fiber-optic costs more.
4. A drop looks much like a telephone jack. Atlanta used to pay up to $1,000 apiece for many drops, but now spends no more than $325 apiece.
5. Atlanta paid $1,200 per classroom to install a switch to connect several computers. Other districts wire classrooms without these switches.
6. Atlanta added wireless nodes like cordless phones to provide network access without plugging into a drop. Many teachers prefer the wireless system.
Larger schools have one or more secondary closets to reach distant rooms.
Graphic includes a aerial view diagram of a school, a computer area with monitor, CPU, connection switch, table and chair with the numbered items pinpointed.
Atlantas gigabit ethernet line is 22 times faster than any other means of data transmission.
(In kilobits per second)
ISDN digital phone line.......128 kbps
T1 line.....................1,500 kbps
Cable modem and some DSL...30,000 kbps
T3 line....................45,000 kbps
Gigabit ethernet........1,000,000 kbps
Sources: Atlanta Public Schools, staff research
/ CHUCK BLEVINS / Staff
HOW THE E-RATE PROGRAM WORKS
Congress created the "education rate" --- or E-rate --- in 1996 to help schools and libraries get Internet access. It is funded by a surcharge on interstate and international telephone calls, usually a few dollars a month.
The money can be used to pay for computer networking infrastructure --- the electronic plumbing required to route Internet traffic to and from buildings. Some equipment, such as computers, does not qualify for E-rate funding.
E-rate can also help schools and libraries pay their phone bills and other telephone-related costs.
Every year, about $2.25 billion in E-rate money is made available to public schools and libraries, private schools with endowments of less than $50 million, and many private libraries. The pool of money does not meet demand, so priority for some requests is given to schools and libraries serving poor students.
The program is administered by the Schools and Libraries Division of the Universal Service Administrative Co., a nonprofit corporation overseen by the Federal Communications Commission.
The USAC board of directors consists of 19 members from schools, libraries and the telecommunications industry. Major companies represented on the board include Verizon, AT&T and Cox Communications, which is controlled by Cox Enterprises, the Journal-Constitution's parent company.
--- Paul Donsky
The Nation: "The Internet School Scam"
by TODD OPPENHEIMER (from the February 16, 2004 issue)
When large amounts of cash and the entrepreneurial spirit intersect with an institution as impoverished and trusting as schools, it's not long before financial scandal strikes. That time is now here, and the nation's public schools are getting a spectacular Enron-style education, soon to be elevated to the investigative chambers of Congress. This scandal also illustrates, rather painfully, the confusion among education's policy-makers about what really should be emphasized in the nation's classrooms.
The story begins with the schools' rapid investment over the past decade in computer technology and Internet systems. The dollars for many of those purchases have come from a little-known federal program called the "e-rate" (for education rate). Launched as part of the 1996 Telecommunications Act, the program is overseen by the Federal Communications Commission and its designees, a series of loosely run, quasi-public management firms. Each year, the e-rate provides poor schools with roughly $2.25 billion in subsidies for new Internet networks. The subsidies come from a tax on everyone's phone bill--a line innocuously labeled "universal service fee"--which started at 3 percent but now hovers around 9 percent.
The revenues from this tax cover up to 90 percent of a poor school's costs for Internet systems. This has allowed school districts to contract with some of the nation's top-of-the-line technology firms--outfits like NEC, Verizon and IBM. Construction contracting has always been fertile ground for inflated costs and corrupt payment schemes, but the Internet wiring jobs--with their wide popularity, unprecedented expense and technical complexity--have taken these opportunities to spectacular new levels.
Consider a few details from one such deal, in San Francisco. In October 2000 the FCC's management firm approved a $50 million grant to finance a massive school networking project in the city. (The school district was on tap for another $18 million, making the total cost come to $68 million.) Months later, to everyone's surprise, the district turned the $50 million grant down. After examining the contract, district technicians had discovered they could build the system themselves for less than their meager share of the costs--that is, for less than $18 million.
The reasons become apparent in the fine print of the voluminous bid from NEC, the firm that won the San Francisco contract. Onpage after page, NEC generously marked up prices on computer hardware, sometimes by as much as 400 percent. On one small Internet switch, for example, NEC's bid would have given the firm a profit margin of $780,000. This is the educational equivalent of the $640 toilet seats famously sold to the Pentagon by military contractors during the Reagan Administration.
The basic problem here is well-known to federal authorities. Various Republican Congress members, wary of anything that smells like a new tax, have long been questioning the necessity of the e-rate program. In 1998 Senator John McCain was concerned enough about oversight weaknesses in the program that he asked the General Accounting Office to investigate. The GAO found that the FCC's first e-rate management firm was sending out letters of funding commitment before evaluating the projects it was financing, and that it had yet to set up an auditing system. The GAO also noted that the e-rate created a duplicate program for funding technology in schools, because $12 billion was already available through the Education Department.
Although the FCC's e-rate management firms promised to make corrections, little was done. An audit by the FCC's Inspector General last year found questionable financial dealings of one sort or another "at nearly all locations" where e-rate contracts were examined. By late 2002 federal authorities had begun to take some action. In one case prosecutors charged a New York company, Connect2 Internet Networks--which had done more than $9 million of business with thirty-six schools--with eight counts of federal crimes. The allegations: The firm bought more expensive gear than its customer schools could afford, created fake invoices to suggest the schools had paid their share, then coached school officials to lie about the arrangements. (Connect2's owner, John Angelides, eventually pleaded guilty to one count of conspiracy.)
As the Connect2 case was developing, federal auditors killed an $18 million e-rate job with IBM in Ysleta, Texas. They concluded that IBM had set up the job in such a way that it precluded bids from competing Internet contractors. IBM denied the charges, but government regulators said, "The record reflects that the overriding goal of the IBM-Ysleta relationship" was to maximize the federal subsidy, "not necessarily to promote educational goals." IBM, which offered the same "sole source" option to many districts around the country, was not a small player in this game. Up until the Ysleta contract, it had received $351 million of e-rate money. For 2003, IBM sought nearly $1 billion in e-rate projects--nearly half the program's annual budget. Most of that money is now being held up while the problems with IBM's bids are investigated.
By spring 2003, Congressional investigators had gotten wind of these troubles and were embarked on their own inquiries. These are now wrapping up and are expected to be the subject of hearings before the House Energy and Commerce Committee in February or March. From all indications, investigators have found some smoking guns. "We have uncovered numerous instances of fraud and abuse totaling tens of millions of dollars," says Ken Johnson, the committee's press secretary. "We're convinced that the problem is far worse than we feared." There is no formal count yet on how many companies or schools are involved in these abuses, but insider estimates indicate that dozens of different companies across the country may be implicated. (At this point, only two cases have made it through the courts.)
In the wake of these troubles, the FCC and its e-rate management firms are starting to take more care in approving new grants. But the size of the e-rate grants, and many others that support high-end wired systems in the schools, have not appreciably diminished.
There are three bitter paradoxes in this. First, it won't be long before the Internet goes wireless, which will make much of the schools' investment in wired computing--at a cost of roughly $80 billion over the past decade--obsolete. Second, yesteryear's frenzy to wire the schools occurred during very flush times. Today, states are struggling with budget cuts--and the damage these cuts are doing to fundamental school needs such as building repairs, teacher salaries and purchases of books, science supplies and other classroom necessities.
Third, and perhaps most important, most computer technology has been sold to schools--especially poor schools--on little more than hype. One of the most commonly heard selling points in this campaign is to prepare youngsters for tomorrow's increasingly high-tech jobs. But when business leaders talk about what they need from new recruits, they hardly mention computer skills, which they find they can teach employees relatively easily on their own. Most employers say their priority is what are sometimes called "soft" skills: a deep knowledge base; the ability to listen and communicate; to think critically and imaginatively; to read, write and figure; and many other capabilities that schools are increasingly neglecting. A report from the Information Technology Association of America, which represents a range of companies that use technology, put it this way: "Want to get a job using information technology to solve problems? Know something about the problems that need to be solved."
All of which casts entirely new light on the "digital divide"--the common belief that the poor are being shut out of social and economic opportunities because they have fewer computers than wealthy families do. Widely promoted by the Clinton Administration, this campaign has become so appealing that, according to a recent report from the Education Department, computers are almost as abundant in poor schools now as they are in wealthy ones. Nonetheless, political and education leaders continually cry about this supposedly terrible divide. In reality, the schools' new technology riches have taken the real divide between rich and poor children--the educational divide--and widened it.
In Harlem, for example, teachers in overcrowded classrooms now have to spend much of their time managing technical hassles the schools can't afford to fix, and watching for cheating, instant-messaging tricks and illicit material on screens that teachers cannot control or even see. When the computers do work, fancy software programs automate design and math functions so beautifully that students don't have to think through much of their work anymore. School papers throughout the country are so dominated by computer graphics these days that students often spend only a fraction of their time on the intellectual content of the assignment. Strangely, instead of bemoaning scenes like these, nearly everyone--teachers and parents, principals and politicians--applaud them.
Meanwhile, schools that are doing truly good work often downplay technology, concentrating instead on human basics. These not only involve creative, often theatrical, approaches to the three Rs; they also include a broader definition of achievement than the thin, standardized tests being pushed by the Bush Administration. Interestingly, most of these schools have also invested in their teachers more than they have in machinery. Before the rest of the nation's schools and their federal benefactors buy more fancy digital novelties, they should get their houses in order on academic basics of this sort. Everyone knows you need to learn to walk before you run.